Tracker fund definition

What is a tracker fund?

A tracker fund is a fund that’s been set up to match the price of a market index. Investing in a tracker fund lets you invest in the different assets included in a market index, without having to buy things like shares or bonds directly.

How do tracker funds work?

Tracker funds enable you to invest in a large group of companies with a single investment. They are created by a fund provider – examples include Vanguard or Legal & General – and are looked after by a fund manager. 

Tracker funds are also known as ‘passive investments’. That’s because the fund manager doesn’t decide what to invest in. Instead, the fund manager will invest in the same companies or assets that are included in the index that the fund tracks, according to their weighting in that index. Examples of an index include the FTSE 100, or the S&P 500.

In doing so, the fund will closely ‘track’ the underlying index’s price movements – and investing in the fund will mean that your investments will mirror the index’s performance. If the index is doing well and rising, your investments will go up in value. If it’s doing badly and falling, your investments will go down in value.

Investing in tracker funds is low-effort – you need to put work in at the start to research a fund and make sure it’s right for you. But once you’ve invested, the fund manager will take care of ensuring the fund is performing as it should.

Examples of tracker funds

Here are some examples of tracker funds that we offer at Moneybox.

• Fidelity Index World (Global Shares): track the global stock market with shares in more than 1,600 companies like Apple and Amazon.
• Fidelity Index Emerging Markets (Emerging Markets Shares): invest your money across a range of companies from developing markets, including Asia and Latin America.
• iShares Global Property Equity (Global Property Shares): gain exposure to over 300 property companies across a range of industries, from residential to retail.
• Legal & General Global Health and Pharmaceuticals (Global Health and Pharmaceuticals Shares): champion the healthcare sector by investing in companies like Johnson & Johnson and Pfizer.
• Legal & General Global Technology (Global Technology Shares): back the building of new technologies by investing in the biggest tech companies like Google.